The Ninth U.S. Circuit Court of Appeals has upheld the validity of a City of Lodi ordinance intended to force the cleanup of contaminated land and groundwater. Although it struck down a few provisions of Lodi's comprehensive law, the court ruled against insurance companies that contended federal and state "Superfund" laws prevented Lodi from imposing its own cleanup regulations.
The unanimous three-judge panel held that the federal Comprehensive Environmental Response, Compensation and Liability Act (CERCLA, or the Superfund law) envisioned states approving and implementing complementary regulations. And in California, the court ruled, municipal ordinances such as Lodi's are equivalent to state laws.
"[W]e hold that CERCLA permits both states and their political subdivisions to enact hazardous waste regulations and pursue additional remedies at their own expense, " Judge Harry Pregerson wrote, as long as the remedies do not conflict with CERCLA.
The battle between Lodi and three insurance companies — Fireman's Fund, Unigard Insurance, and Unigard Security Insurance — has been around since the mid-1990s and has already made its way to the state Supreme Court. Earlier this year, the state's high court upheld a provision in Lodi's ordinance allowing the City Council to issue legislative subpoenas as part of the city's investigation and cleanup process. Connecticut Indemnity Co. v. Superior Court, 98 Cal. Rptr. 2d 221 (2001). Now comes the federal court ruling that further supports a city's ability to take charge of contaminated sites within its boundaries.
In 1989, Lodi first detected tetrachloroethylene — a dry cleaning agent and carcinogen often known as PCE — in the groundwater that supplies the town. A few years later, the state Department of Toxic Substances Control (DTSC) identified four small dry cleaning businesses as "potentially responsible parties" and listed the "Lodi Groundwater Site" as a state hazardous waste site.
In 1997, the city signed an agreement with DTSC that called for the city and state to work cooperatively on investigating and remediating the PCE. The agreement designated Lodi as the lead enforcement agency. As required by the agreement, the city went on to adopt the Comprehensive Municipal Environmental Response and Liability Ordinance (MERLO), which allows the city to investigate and remediate contamination in the soil and groundwater.
Lodi then began procedures against the dry cleaners and their insurance companies. The insurers quickly sued the city, claiming that CERLCA and the state's Carpenter-Presley-Tanner Hazardous Substances Account Act (HSAA) preempted the city's ordinance. A federal district court ruled against the insurers in two separate lawsuits, which were combined on appeal.
The Ninth Circuit addressed the three types of preemption, which are similar for both federal and state: express preemption, field preemption, and conflict preemption. The court found that neither CERCLA nor HSAA expressly preempted local law. The court rejected the insurance companies' argument that CERCLA and HSAA together occupied the field of hazardous waste. Noting that CERCLA creates "a floor, not a ceiling," Pregerson wrote that CERCLA anticipates that states will enact supplemental environmental legislation. And the agreement between Lodi and DTSC proves that the state sanctioned Lodi's efforts. "Moreover, in California, municipal ordinances are state law and may be prosecuted in the name of the ‘people of the state of California,'" Pregerson wrote.
The court's examination of how Lodi's ordinance could conflict with the federal and state laws was extensive. Essentially, the court held that there were only three conflicts: The Lodi ordinance improperly expanded the city's ability to sue insurers beyond what is permitted by state insurance law; the city ordinance improperly limited any liability the city itself might have (insurers have argued that the city itself is a potential responsible party because of its sewer system operations); and the city ordinance's burden of proof was superceded by HSAA. The court held those sections of Lodi's ordinance were "easily severable" and upheld the remainder of the ordinance.
Fireman's Fund Insurance Company v. City of Lodi, No. 99-15614, and Unigard Insurance Company v. City of Lodi, No. 99-15802, 01 C.D.O.S. 9308, 2001 DJDAR 11651. Filed October 30, 2001.
For Fireman's Fund: Terry Houlihan, McCutcheon, Doyle, Brown & Enerson, (415) 393-2000.
For Unigard: Dennis Zaragoza, (415) 217-4757.
For the city: Michael C. Donovan, assistant city attorney, (650) 372-5100.
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